Supply Contracts Under Bounded Order Quantities

Abstract

It is the practice in some industries, as well as within multiplant organizations, to specify bounds on the range of allowable order values. That is, the buyer contracts to place an order within a small range in a future period. The specification of the range protects the supplier against large variations in the order at short notice, although it reduces the flexibility of the buyer to respond to demand changes in his own market. Hence, in exchange, the supplier is willing to reduce the price of the component to the buyer. This paper examines the implications of this specification for the production/inventory decisions. The optimal contract is determined from the structure of the solution to the production/inventory problem.

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Document Details

Document Type
Technical Report
Publication Date
Jan 16, 1992
Accession Number
ADA254365

Entities

People

  • Anant Kumar
  • Gérard Cornuéjols
  • Ram Akella

Organizations

  • Carnegie Mellon University

Tags

Communities of Interest

  • Human Systems

DTIC Thesaurus Topics

  • Abstracts
  • Algorithms
  • Assembly
  • Computations
  • Contracts
  • Corporations
  • Inventory
  • Linear Programming
  • Literature Surveys
  • Manufacturing
  • Mathematical Analysis
  • Military Research
  • Operations Research
  • Production
  • Random Variables
  • Resilience
  • Specifications

Readers

  • Calculus or Mathematical Analysis
  • Government and Public Administration Law.
  • Industrial Economics